Crowdfunding of investments drops to 400 million euros in 2020, 100 million euros declared in the first quarter of 2021
In 2020, more than 400 million euros were invested in securities offers in Germany via crowdfunding or crowdfunding platforms according to a study by Crowdinvest.de supplemented by data from Crowdfunding of the Bundesverband (the German Crowdfunding Association). The first quarter of 2021 saw around 100 million euros. According to the report, 2020 was the first year of decline in the crowdfunding market. Only offers based in Germany are included in the Crowdinvest.de report, which may be the reason why Bundesverband Crowdfunding reports higher figures (CI requested clarification).
According to the Crowdinvest.de report, the overall market has shrunk significantly in 2020 compared to 2019 impacted by the current health crisis of COVID-19.
- Total market collapses to 327.8 million euros [-21.5%]
- Crowd investments in real estate fell to € 254.9m [-18.9%]
- Corporate mezzanine and equity financing generated € 50.9 million [-6.2%]
- Crowdfunding loans for companies fell to 3.6 million euros [-89.1%]
- Participatory investments for energy projects increased to 13.4 million euros[+ 44.8%]
- The cumulative amount of crowdfunding since 2011 amounts to 1.440 billion euros
While the market grew from 417.7 million euros in 2019 to 327.8 million euros in 2020, last year’s figures were still higher than in 2018 when the total stood at 305 , 2 million euros.
By combining corporate finance, including mezzanine, equity and debt capital, Crowdinvest.de reports that corporate finance fell 37.6% in 2020. The decline in 2020 was largely due to the decline in credit-based financing. [-89.1%]. Funding Circle, one of the main platforms until 2019, stopped granting equity loans in Germany. To boost activity, some platforms are now also working on private placement deals that are not recorded as crowdfunding in the report.
The Bundesverband Crowdfunding has issued a positive statement to the market, saying it is confident about the growth and development of the industry in the future. The group highlighted the new European Union rules (ECSPR) which allow issuers to raise up to € 5 million in all member states as a key catalyst for the future.
Bundesverband Crowdfunding indicates that many foreign platforms will be active in Germany and further stimulate the market. At the same time, their members will be able to take advantage of the new regulation to spread throughout Europe. From November 2021, it is expected that the platforms will be able to obtain a crowdfunding license on a European scale.
Cite the crowdfunding of the Bundesverband [translated]:
“In the second quarter of 2020, the Corona pandemic led to investor uncertainty. However, the evolution of the market in the 3rd and 4th quarters of 2020 and in the first quarter of 2021 shows that the interest in crowdfunding is still great. The level of the previous year was again reached in the first quarter of 2021. In particular, corporate financing with equity and mezzanine instruments is at the same level as in 2020. Energy financing increases slightly , while real estate financing shows slight losses compared to the previous year. . But association platforms are already showing strong growth in this market segment.
“Crowdfunding platforms make an important contribution to improving access to capital,” said Uli fricke, vice-president of the association.
While industry insiders are optimistic that the new post-pandemic and crowdfunding rules will fuel the industry’s growth, there is an element of concern that German lawmakers and regulators may incorporate domestic rules that hinder the growth of online capital formation. For platforms to operate across the EU they need to be regulated in a home jurisdiction and if a country has more stringent rules this can hinder expansion as issuers and / or platforms choose jurisdictions more favorable to FinTech.